Staff and materials shortages slow growth in UK construction sector
Following a 24-year high in June, July’s dip in IHS/Cips index is widely blamed on ‘Brexit friction’
Last modified on Thu 5 Aug 2021 08.03 EDT
Britain’s builders struggled to keep pace with the demand for new homes and maintenance work in July as shortages of materials and skilled staff slowed growth, according to a closely watched industry survey.
After hitting a 24-year high in June, the construction industry last month grew at the slowest pace since February, after firms that had stockpiled materials in the first half of the year began to run low while others were unable to find enough workers to fulfil bulging order books.
Analysts said the future looked rosy for much of the industry as the economy reopened and a consistently high level of growth was likely to re-establish itself once the pressure on supply lines began to ease.
The IHS Markit/Cips UK construction purchasing managers’ index dipped to 58.7 in July. The score still represents growth – anything above 50 is considered positive – but shows a notable slowdown after June’s 66.3.
More than eight in 10 businesses said they had seen prices for raw materials and other costs rise over the period. Only one in 100 said costs fell in July.
Higher prices combined with shortages of cement, copper and steel to delay some projects that were already under way and some planned projects, industry bosses said.
Two-thirds of businesses said they had to wait longer for deliveries, putting this down to Brexit friction, congestion at ports and a shortage of transport.
An assessment of the industry by the surveyors body Rics found that 82% of firms said a shortage of materials hampered the market during second quarter, up from 57% previously.
“Moreover, the cost of materials is expected to increase by nearly 10% over the next 12 months,” it said.
Tim Moore, economics director at IHS Markit, said: “July data marked the first real slowdown in the construction recovery since the lockdown at the start of this year”.
“The loss of momentum spanned all major categories of construction work and was most pronounced in the housebuilding sector,” he added.
Martin Beck, the senior economic adviser to the EY Item Club, said: “A fall in the construction index accompanied declines seen in the same month’s services and manufacturing indices. But the loss of momentum in the construction sector looks to be more an issue of supply-side constraints, related to a lack of transport availability, port congestion and trade frictions, than weaker demand.”
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